Though life insurance policies can often seem like a one-size-fits all financial arrangement, it’s really anything but.
Beyond choosing basic policy provisions, like the death benefit amount, the policy term (in the case of term life insurance), or even the monthly premium, there’s a wide selection of riders that can be used to customize your policy.
Some allow you to add additional life insurance coverage, or even add other parties to your policy. But others provide what are collectively known as living benefits, because they can either waive your premiums during a time of distress, or provide you with advances against your death benefit while you’re still alive.
Most can be used with either term life or permanent life insurance policies. But I personally feel strongly that term policies are better for the great majority of people.
Let’s look at 12 the most common life insurance riders.
1| Accidental Death
Benefit to you: Increases the death benefit of your life insurance policy if an accident is the cause of death. Typically pays double the rate of the regular face value of the policy. It’s a recommended rider if your occupation is more hazardous than usual, or if you spend a lot of time on the road, either for a long commute or for work purposes.
How it works: The policy is set up to provide a fixed death benefit, say $100,000. If an accidental death rider has been added, the policy may pay $200,000 upon accidental death. The accidental death doesn’t need to be immediate either. Some policies will pay the higher death benefit if death occurs up to one year after the accident, as long as the accident was the ultimate cause of death.
2| Children’s Term Rider (or Child Rider)
Benefit to you: Enables you to add a small amount of life insurance coverage for your child (or children). The benefit amount is relatively small, intended mostly for final expenses. But it’s less expensive than maintaining separate policies for each child.
How it works: You can add a single child rider to your policy to cover all current and future children in your family. Children can be added up to age 18, and coverage will continue through age 25. The riders are typically limited to no more than $25,000 per child, and no medical exam will be required.
Most child riders also come with a conversion provision. It will allow the child to convert the rider to a separate policy at an amount up to five times higher than the benefit in the rider. The conversion generally does not require the child to pass a medical exam. That makes it a way to guarantee future coverage should your child develop a health condition, limiting his or her ability to get an independent policy.
“As a life insurance agent and as a parent, a child rider is a must on every policy,” advises Zhaneta Gechev, founder of One Stop Life Insurance. “Simply put, a child rider is an add on onto a parent’s life insurance. It covers eligible household children for pennies on a dollar, should something happen to them. Another huge advantage of a child rider is the option to convert into an individual policy.”
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